By Laurence Kotlikoff
Originally posted at PBS Newshour, January 2016
Alan Skupp is an attorney who lives in Livingston, New Jersey. He and his wife run a market intelligence company. Alan wrote me about one of the provisions in the new Social Security law, which I and perhaps everyone else in the country take to mean that if you suspend your retirement benefit after April 29, 2016 (in order to let it accumulate delayed retirement credits), you lose the opportunity to change your mind and request that Social Security pay you all suspended benefits in a lump sum. As Alan’s email indicates, the sections of the old law, which this particular provision in the new law references, suggest a very different interpretation.
The best way to see what’s involved is via an example. Suppose Joe, now 66 and a half, has never filed for retirement benefits. Since he never married, he realizes that if he continues to wait until 70 to collect his retirement benefit at its highest possible value, as is his plan, he won’t get much of anything for himself or anyone else if he develops a brain tumor at say 69 and is given three months to live. So he heads down to Social Security and files for and also immediately suspends his benefit. Sure enough, at 69, Joe develops a brain tumor and is given three months to live. He rushes over to Social Security and requests all his suspended benefits retroactive to when he first turned 66 (full retirement age).
My belief has been that Social Security, due to the new law, would tell him to get lost. But Alan thinks they would pay him all his suspended benefits in a lump sum, but only from the time he first filed for benefits — that is, they would give him back benefits from 66 and a half and not from age 66; they would not include benefits that were retroactive to before he first filed.
Alan makes a compelling argument that he’s got it right and all the rest of us have gotten it wrong. And I’ve changed my own opinion on this accordingly. However, if someone else convinces me otherwise, you’ll be reading another column saying I reverted back to my original opinion. One thing that is perhaps telling that runs in support of Alan’s view is that Social Security has not altered its website on this issue. I say “perhaps,” because it could just be that the Social Security Administration hasn’t updated their website yet.
We reached out to Social Security for some clarification. Dorothy J. Clark of the Social Security Press Office responded:
At this time, our legislative and policy staffs are diligently working with Congress to analyze the intent of the legislation and update our instructions.
I do not have a date, but I will respond when new information is available.
We’ll keep you updated on what we find out.